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Frontiers of Business Research in China
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Entry mode choice of Chinese enterprises: The impacts of country risk, cultural distance and their interactions

Frontiers of Business Research in China volume 5, pages 63–78 (2011)Cite this article

Abstract

Recent years have witnessed a phenomenal growth in the number of Chinese enterprises “going global.” Drawing on three leading theoretical perspectives including the transaction cost theory, organizational capability theory and eclectic theory, this paper develops hypotheses to test how country risk and cultural distance are associated with entry mode choices of enterprises from China. Based on a sample of 167 Chinese companies, an empirical investigation has been conducted employing logistic regression and hierarchical regression analyses. Our results show that country risk and cultural distance have significant impact on entry mode choice. With the increase of country risk or cultural distance, businesses prefer non-ownership-based entry modes such as trade and licensing. However, entry mode choice is also noticeably influenced by the interaction between country risk and cultural distance, which is a new finding of international entry mode research. Furthermore, private enterprises are more likely to adopt high-involvement entry mode than the state-owned enterprises, and service enterprises are less likely to use high-involvement entry mode, which suggests that different approaches are used to deal with country risk and cultural distance by various types of enterprises.

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Affiliations

  1. Department of Management, Faculty of Business Administration, The Chinese University of Hong Kong, Hong Kong, China

    Yuehua Xu

  2. Lingnan College, Sun Yat-sen University, Guangzhou, 510275, China

    Yuehua Xu, Songhua Hu & Xu’ang Fan

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  1. Yuehua Xu
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  2. Songhua Hu
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  3. Xu’ang Fan
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Correspondence to Yuehua Xu.

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Xu, Y., Hu, S. & Fan, X. Entry mode choice of Chinese enterprises: The impacts of country risk, cultural distance and their interactions. Front. Bus. Res. China 5, 63–78 (2011). https://doi.org/10.1007/s11782-011-0121-8

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  • DOI: https://doi.org/10.1007/s11782-011-0121-8

Keywords

  • country risk
  • cultural distance
  • entry mode choice
  • international business